Economic growth in South Africa is too slow to improve living standards in a country where a third of the population is excluded from the economy, according to the International Monetary Fund (IMF).
“The cost of insufficient action has reached the critical point,” the lender’s first deputy managing director David Lipton said in a speech in Johannesburg on Tuesday. “What is needed is a fresh and energetic review of South Africa’s policies, followed by action.”
The IMF cut its 2016 growth forecast for Africa’s most-industrialised economy to 0.1% from 0.6% two weeks ago, and said the economy isn’t keeping up with population growth of 1.7%.
The jobless rate increased to 26.7% in the three months through March, the highest in at least eight years.
Wage-negotiation practices involving big businesses and labour groups excludes a third of the working-age population from the economy, while salary agreements that bind entire industries present obstacles to small and medium-sized businesses, Lipton said.
“The recent dialog between government, labour and business is encouraging, but the talks need to produce substantive action,” he said.
State-owned enterprises that dominate certain industries and keep out private-sector operators exacerbate bottlenecks in the economy, according to the IMF.
“They are plagued with inefficiencies, poor management and weak balances sheets,”’ Lipton said. “Support for money-losing companies is a growing drain on government coffers.”